Massachusetts Foreclosure Case Law Update, …

1 Massachusetts Foreclosure case Law update , Legislative Developments & Trends 2013 May 13, 2013 Mass Mortgage Bankers Association2d Annual ConferencePaul J. Mulligan, Moran, PLLCW altham MA 024541I. Eaton v. Fannie Mae(462 Mass. 569, June 22, 2012) Facts: Fannie Mae was purchaser/assignee of bid after Foreclosure sale. Fannie Mae filed a summary process eviction case against former owner. Borrower, Henrietta Eaton filed complaint in Superior Court in order to obtain an injunction to prevent Fannie Mae from taking possession of the house. Eaton argued that foreclosing mortgagee did not hold note at the time of the Foreclosure , so Foreclosure is void. Fannie Mae argued that history of Foreclosure in MA only required assignment of mortgage. Superior Court held granted the injunction stating that common law in MA provides that a foreclosing mortgagee must hold the note in order to J. Mulligan, Moran, PLLCW altham, MA 02454 Eaton v. Fannie Mae (con t) SJC ruling: Foreclosing entity must be holder of mortgage of record AND holder of note OR an authorized agent of the note holder.

2 We construe the term "mortgagee" in G. L. c. 244, 14, to mean a mortgagee who also holds the underlying mortgage note (Idat 584)..however, we do not conclude that a foreclosing mortgagee must have physical possession of the mortgage note in order to effect a valid Foreclosure . There is no applicable statutory language suggesting that the Legislature intended to proscribe application of general agency principles in the context of mortgage Foreclosure sales. Accordingly, we interpret G. L. c. 244, 11-17C(and particularly 14), and G. L. c. 183, 21, to permit one who, although not the note holder himself, acts as the authorized agent of the note holder, to stand in the shoes of the mortgagee as the term is used in these provisions (Idat 586).3 Paul J. Mulligan, Moran, PLLCW altham, MA 02454 Eaton v. Fannie Mae (con t) we exercise our discretion to hold that the interpretation of the term mortgagee in G. L. c. 244, 14, and related statutory provisions that we adopt in this opinion is to apply only to mortgage Foreclosure sales for which the mandatory notice of sale has been given after the date of this opinion (Id.)

3 At 588-589). Important Footnotes: #2 ..the term "note holder" is used to refer to a person or entity owning the mortgage note (Id. At 571). #28 It would appear that at least with respect to unregistered land, a foreclosing mortgage holder such as Green Tree may establish that it either held the note or acted on behalf of the note holder at the time of a Foreclosure sale by filing an affidavit in the appropriate registry of deeds pursuant to G. L. c. 183, 5B. The statute allows for the filing of an affidavit that is "relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title." Such an affidavit may state that the mortgagee either held the note or acted on behalf of the note holder at the time of the Foreclosure sale. See G. L. c. 183, 54B (Id. at 589).4 Paul J. Mulligan, Moran, PLLCW altham, MA 02454II. Chapter 194 of the Acts of 2012 effective August 3, 2012, except Sections 1, 2 and 5, which are effective November 1, 2012 Main Requirements for Notices of Sale under MGL c.

4 244 14 for mortgages that have been assigned to the foreclosing new requirement for foreclosing Creditors to conduct a good faith review of borrowers of Certain Mortgage Loans for Foreclosure avoidance prior to publishing first Notice of Sale execution and recording of two new affidavits prior to publishing first notice of of Compliance with new MGL c. 244 35B, EatonAffidavitPaul J. Mulligan, Esq. Orlans Moran, PLLCW altham, MA 024545 Chapter 194 of the Acts of 2012 Also: Extends time for in-person counseling requirement to take effect in Reverse Mortgage Laws (MGL c. 167E, 7A and c. 171 65C1/2) Establishes Task Force for study of reduction of post- Foreclosure vacancies and Foreclosure mediation programs Mandates the tracking of outcomes of loan modifications under new law by DOB and AG (to sunset December 31, 2017) Provides that the DOB shall provide regulations to aid in the administration and enforcement of the new law Enables immediate applicability of Section 2 (loan modification review for Certain Mortgage Loans) for borrowers who had not been sent a Notice of Right to Cure prior to August 3, 2012 Paul J.

5 Mulligan, Moran, PLLCW altham, MA 024546 Overview of Sections: Section 1 Section 1: Revises MGL c. 244 14 re: assignments of mortgage Completely replaces the current MGL. c. 244 sec 14. though mostly minor changes Requires the recording of all assignments of mortgage into the foreclosing entity prior to sending out the Notice of Sale ("NOS") under MGL c. 244 14: in the event a mortgagee holds a mortgage pursuant to an assignment, no notice under this section shall be valid unless (i) at the time such notice is mailed, an assignment, or a chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds for the county or district where the land lies and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section. Paul J. Mulligan, Moran, PLLCW altham, MA 024547 Section 1 Requires recording information for all assignments of mortgage to be included in the NOS and amends the statutory form of NOS to include the recording information of the assignment(s): (Form.)

6 MORTGAGEE S SALE OF REAL virtue and in execution of the Power of Sale contained in a certain mortgage given and recorded , , , of which mortgage the undersigned is the present holder,.. (If by assignment, or in any fiduciary capacity, give reference to the assignment or assignments recorded with ..Deeds, , , of which mortgage the undersigned is the present holder,..) for breach of the conditions of said mortgage and for the purpose of foreclosing the same will be sold at Public Auction clock,.. M. on day (insert year),.. (place).. all and singular the premises described in said mortgage, (In case of partial releases, state exceptions.) To wit: (Description as in the mortgage, including all references to title, restrictions, encumbrances, etc., as made in the mortgage.) Terms of sale: (State here the amount, if any, to be paid in cash by the purchaser at the time and place of the sale, and the time or times for payment of the balance or the whole as the case may be.)

7 Other terms to be announced at the sale. (Signed) _____Present holder of said Paul J. Mulligan, Moran, PLLCW altham, MA 024548 Section 1 The amendments to MGL c. 244 14 codify the precatory language in the SJC's Ibanezdecision that: "We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent Foreclosure sale, although recording is likely the better practice." United States Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637, 651 (Mass. 2011)(emphasis added).Paul J. Mulligan, Moran, PLLCW altham, MA 024549 Overview of Sections: Section 2 Section 2: Two New Sections Added to MGL c. 244: secs. 35B and 35C. 35B Prior to publishing a Notice of Sale, Creditor must make a good faith attempt to avoid Foreclosure for Certain Mortgage Loans 35B(f) Pre-sale Affidavit of Compliance with 35B Prior to publishing a Notice of Sale, a Creditor must executean affidavit, after review of business records, stating that the foreclosing entity is either the holder of the note or authorized agent of the holder of the note and must record the affidavit.

8 35C (b) Pre-sale Eaton affidavit Prior to publishing a Notice of Sale, a Creditor must executean affidavit, after review of business records, stating that the foreclosing entity is either the holder of the note or authorized agent of the holder of the note and must record the affidavit. Best Practice Record the notice before publishing the Notices of Sale Best Practice Publishing = mailing OR publishing in a newspaper REBA Form of Affidavit a combined affidavit 35B and 35C The recorded affidavit protects a third party who later purchases the property from subsequent loss of the J. Mulligan, Moran, PLLCW altham, MA 0245410 Section 2: New MGL c. 244 35B 35B (a) introduces definitions of a number of newly defined concepts including that of a "Certain Mortgage Loan" ("CML") and "Affordable Monthly Payment". Certain Mortgage Loan ( CML ): A CML is broadly defined as a loan with any one of these features: an introductory interest rate which is 2% or more below the fully indexed rate, allows interest only payments (other than HELOC's), payments that fail to fully amortize the loan, is underwritten based on less than full documentation, certain prepayment penalties, an LTV at or above 90% and debt ratio of more than 38% or an LTV that exceeded 95%.

9 11 Paul J. Mulligan, Moran, PLLCW altham, MA 02454 Section 2: New MGL c. 244 35B (cont.) If despite due diligence the Creditorcannot determine that the loan is not a CML, it must assume it is and comply with Section 35B. Loans made by the MA Housing Finance Agency are not considered CML's. "Affordable Monthly Payment": monthly payments which a borrower is able to make, taking into account verifiable income, debts, assets and obligations 35B (b) Prior to publishing a notice of sale on a CML, the Creditor must have "taken reasonable steps and made a good faith effort to avoid Foreclosure " before publishing the NOS. An proposed loan modification review process which achieves a presumption of good faith is provided in Subsection 35B (b)(2). It provides that a Creditor should: review a Borrower s financial information to determine what an Affordable Monthly Payment would be, attempt to fashion a loan modification which achieves the Affordable Monthly Payment, and conduct a compliant analysis to compare the Net Present Value of the modified loan with the net recovery of the foreclosed loan under HAMP or other specified programs.

10 Paul J. Mulligan, Moran, PLLCW altham, MA 0245412 Section 2: New MGL c. 244 35B (cont.) To begin the process, the Creditor must send an additional notice to a Borrower of a CML of the right to pursue a "modified mortgage loan" by 1st class and certified mail. This notice must be mailed concurrently with the RTC under MGL c. 244 35A. A copy of the notice must be filed with the Division of Banks ("DOB") and the Attorney General's ("AG") office. The form of notice and information in the notice will be similar to the RTC format promulgated by the DOB. It must also include the AG's loan modification assistance telephone number. Process Steps and Timeline After delivery of the notice, Borrower then has 30 days from the to respond to the notice, select aforeclosure avoidance alternative and provide the required financial information The Creditor then has 30 days to provide the Borrower with a detailed assessment of its review and demonstration of its good faith efforts to avoid Foreclosure including making an offer or declining to offer a loan modification.